Four themes driving the market- Part 2 | John McGrath

In John McGrath’s latest Switzer column he spoke about the prestige market recovery and the urban hubs emerging specifically in Sydney.

Last week he focused on China growth and the impact of investors and first home buyers. If you missed it you can read it here.

Here’s what he had to say:

Prestige property

While luxury property was lagging compared to the rest of the market, there are clear signals that it is stirring from its slumber and we are expecting material price rises above $2M this year.

Political and economic stability, rising business confidence and increasing overseas demand is driving new momentum in prestige property after several years of post-GFC stagnation.

According to RP Data figures, the number of $5M-plus sales in Sydney was up 13% in FY14 and the number of $3M-plus sales in Brisbane was up 36%.

Over about the same time period, Australia’s most expensive suburbs began slightly outpacing the lower and middle markets in price growth, up 11.1% compared to 10.9% (middle market) and 9.2% (lower market).

Directly contributing to prestige market confidence is Coalition management of the economy and improving company profits that have pushed the ASX 200 above 5,500 to be 9.75% higher.

Banking and finance executives are once again receiving bonuses and as always, they are spending that money on property by upgrading their homes.

Ex-pats are also back, largely due to the weaker dollar and a higher number of prestige homes coming onto the market giving them more opportunity to buy now before prices begin to rise.

Most ex-pats have no plans to return soon and are only buying now due to the expectation of imminent price growth.

Urban hubs

As infrastructure unlocks pockets of Sydney by creating local employment opportunities and reducing commuting times, values are likely to surge in some areas as families seek more value for money.

Five of the nation’s top 10 fastest selling suburbs are in Sydney’s west, with an average selling time of just 12-15 days. They are Old Toongabbie (houses); Parklea (houses); Quakers Hill (apartments); Lalor Park (houses) and Werrington Downs (houses).

There are three major growth areas in Sydney targeted for new jobs and affordable housing in the long term.

The Western Sydney Employment Area will be the state’s largest new employment space, creating 57,000 new jobs over 30 years and up to 212,000 jobs when fully developed.
Sydney’s second airport at Badgerys Creek will create 35,000 new jobs by 2035, increasing to 60,000 by 2060. Construction will begin in 2016, creating 4,000 jobs initially.
First flights expected mid-2020s. A $3B road infrastructure program will commence shortly.

The South-West Growth Centre incorporates 17,000 ha including Liverpool, Camden and Campbelltown LGAs. Major new centre at Leppington serviced by the new South West Rail Link.
About 110,000 new homes to accommodate 300,000 people – almost the population of Canberra.

The North-West Growth Centre incorporates 10,000 ha including The Hills, Blacktown and Hawkesbury LGAs.
There is a major new centre at Rouse Hill serviced by the North West Rail Link and upgraded Richmond line. About 70,000 new homes to accommodate 200,000 residents.

The NSW Government’s Urban Activation Precincts program is fast-tracking new housing, jobs and has upgraded infrastructure in 8 key urban hubs away from the CBD.

These areas include North Ryde Station, Epping Town Centre and Herring Road, Macquarie Park in Sydney’s north, Carter Street, Lidcombe in the west, and Wentworth Point in Sydney’s inner west.

A significant number of Sydney buyers are giving up on the expensive inner ring and buying in the middle ring, which has experienced some of the strongest price growth in FY14.

They include North Rocks (up 23%), Northmead (16%) and Baulkham Hills (15%), according to Australian Property Monitors.

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